Finance / Legal quick question

i saw this post from somersoft it was posted in 2005

"Say, I will build 2 houses a year, sell one and keep one long term, under the Company's name. This is to generate some equity/capital reserves for the company to be self-financing as well as boost its future borrowing capacity, in/by itself. In this way, my wife and I are no longer required to act as gaurantors for the company's loan."

is this correct / does this still work?

 

I wouldn't say it's boosting it's own borrowing capacity, no.

 

Depends on the lender. Some may require director guarantees regardless of the overall company serviceability and portfolio lvr and profitability..

 

Is it possible? Yes it is possible to build and sell and the company will be able to show income and this would help in borrowing, but I have yet to see a lender that will not require a personal guarantee from all directors. Perhaps it would be possible as the assets of the company build up.

 

I've never seen a lender that doesn't want a guarantee from each director.

A similar parallel would by SMSF lending. Initially the whole idea was that you weren't required to give a personal guarantee for a loan to a SMSF for property. This has changed over the last year or so to the point where it's hard to find a lender that doesn't want a personal guarantee.